Brazil--Aircraft: Qualitative and temporal aspects of "withdrawal" under SCM article 4.7

Law and Policy in International Business, Summer 2002 by Krmpotic, Ivan

appropriate alternative benchmark to the OECD benchmark,110 on the one hand, and had failed to provide any information regarding the compliance of the PROEX II interest rate with the relevant CIRR, on the other.111 However, the finding that the PROEX II rates do not conform to the relevant CIRR or to another "appropriate" benchmark does not shed light on the question of the term "withdraw" in SCM Article 4.7. As discussed earlier, the term "withdraw" was held to mean to "take away what has been enjoyed" or "remove,"112 and yet the Appellate Body suggests in its conclusion that the admitted export subsidies would have been permitted if Brazil could be found to have forwarded an appropriate benchmark by which to measure the subsidy.

The conclusion reached by the Appellate Body rests upon the reasoning that members of the WTO should be permitted to avail themselves of the same "safe harbors" as the OECD members.113 In this sense, item (k) of Annex I attempts to bring effective discipline to the SCM Agreement for officially-supported export credits.114

Whatever rationale remains for item (k), the Brazil-Aircraft Appellate Body had taken a significantly more conciliatory stance toward export credits than the Australia-Leather panel, which is particularly disturbing given the acknowledged trade distorting effects of "red light" export subsidies.115 Although Australia-Leather went to great lengths to distinguish SCM Article 4.7 from the "bring into conformity" standard of DSU Article 19.1, Brazil-Aircraft represents the polar opposite notion, under which it is sufficient for a nation to "bring into conformity" its export subsidy standard in order to be deemed in compliance with SCM Article 4.7. In other words, to "withdraw" a subsidy within the meaning of SCM Article 4.7 has the same meaning as "to bring into conformity" with DSU Article 19.1.

entirely (and therefore to "remove" or "take away" the benefits of export subsidies), the entire SCM Agreement would be better served if the "safe harbor" provided by item (k) were subject to a provision other than SCM Article 4.7. By including actions by governments that merely "bring into conformity" their actions with SCM Article 4.7, rather than going further and withdrawing the measures, the decision in Brazil-- Aircraft does nothing to advance subsidies jurisprudence and, in fact, greatly obfuscates the issue.

IV. THE TEMPORAL ELEMENT OF WTO REMEDIES

A major point of contention between the Brazilian and Canadian authorities centered on the precise moment when PROEX subsidies were deemed to have been "granted" for the purposes of SCM Article 3.1. The arguments revolved around whether the subsidies were direct or potential direct transfers of funds.116 The respondent Brazil argued that as potential direct transfers of funds, the subsidies would be deemed to have been granted at the moment that letters of commitment were issued to Embraer during the course of their negotiations with potential buyers, as opposed to the later time of when NTN-I Bonds were actually issued, as argued by Canada.117